Transition To A Market. Why Gradualism Works And Radicalism Fails?

Grzegorz Kolodko

Montenegrin Journal of Economics, 2005, vol. 1, issue 1, 19-25

Abstract: Years after commencement of the systemic reforms in Central East Europe and the former Soviet Union the debate on the way of conducting reforms is still on. The main question remains: gradualism or radicalism? Unfortunately many countries decided to embark on a radical way of transformation which resulted in a number of cases in decrease of GDP, and consequently substantial lowering in the standard of living of their citizens. By the year 2004 many countries still have not reached the GDP level from the year 1989. Transformation, however, in its very meaning is a gradual process. It consists of three main elements: liberalisation and stabilisation; institutional building; and macroeconomic restructuring. Completion of all three processes requires time, in particular as far as institutional building and microeconomic restructuring are concerned. Poland, although unnecessarily started loosing its GDP at the beginning, recovered relatively rapidly. The economic systemic reforms here can be divided into four periods: "shock without therapy" (1989-1993), "Strategy for Poland" (1994-1997), overcooling (1998-2001) and from 2002 until now the period of accelerated growth. During realisation of the "Strategy for Poland" the country gained 28 percent in economic growth per capita, unemployment shrank from 17 to 10 percent. Results in economic performance are also dependent on the long-term development policy. The Chinese experience proves the importance of it.

Date: 2005
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